The Legislative Reform (Consumer Credit) Order 2008

EXPLANATORY NOTE

(This note is not part of the Order)

This Order amends the Consumer Credit Act 1974 (“the 1974 Act”). Article 3 inserts a new section 16C into the 1974 Act. This creates a new exemption from regulation under the 1974 Act for certain consumer credit agreements. To qualify sums due under the agreement must be secured by a land mortgage and less than 40% of the land must be used or intended to be used as or in connection with a dwelling by the debtor or a person connected with the debtor. Where the debtors are trustees less than 40% of the land must be used by the beneficiary of the trust or a person connected with that beneficiary.

Article 3(2) of the Order makes a consequential amendment to section 8(3) of the 1974 Act, which contains the definition of a consumer credit agreement.

Article 3(3) makes consequential amendments to section 82 of the 1974 Act. Section 82(2A) is amended so that if an agreement is exempt as a result of section 16C of the 1974 Act, section 82(2) will not apply if the agreement amends an earlier agreement or is amended by a later modifying agreement. Section 82(3) is amended so that if an agreement, which is exempt under section 16C of the 1974 Act, modifies an earlier regulated agreement the exempt agreement will not be treated under the subsection as a regulated agreement. Section 82(5A) is amended to disapply subsection (5) where the modifying agreement is an exempt agreement as a result of section 16C. This means that if an earlier agreement, which is cancellable by virtue of section 67, is modified by an agreement which is exempt as a result of section 16C during the cooling off period provided by section 68, the exempt agreement will not be treated as a cancellable agreement.

Article 3(4) makes a consequential amendment to the definition of “exempt agreement” in section 189(1) of the 1974 Act.

Article 4 of the Order amends section 77A of the 1974 Act. Section 77A now provides that a creditor under a regulated agreement for fixed-sum credit has to give the debtor statements covering consecutive periods of not more than one year. The first statement has to cover the period commencing on the day the agreement is made or the day the first movement on the account occurs. Each statement must be given within thirty days of the end of the period to which it relates. Where a period of one year would expire on a non working day the period may expire on the next working day.

Article 5 makes a transitional provision in relation to section 77A of the 1974 Act. It provides that section 77A, as amended by the Order, applies to agreements whenever made and has effect in relation to agreements made before the commencement of section 6 of the Consumer Credit Act 2006 as if the period mentioned in section 77A(1B) of the 1974 Act were a period beginning no later than the day of the commencement of section 6 and ending no later than the day before the first anniversary of that day. Section 77A(1C) is disapplied for these purposes.

Article 6 repeals paragraph 2 of Schedule 3 to the Consumer Credit Act 2006.

Article 7 revokes regulation 11 of the Consumer Credit (Information Requirements and Duration of Licences and Charges) Regulations 2007 (S.I. 2007/1167).

Article 8 amends section 86B of the 1974 Act and defines “payments” for the purposes of that section.

Article 9 amends section 86C of the 1974 Act and defines “payments” for the purposes of that section.

An Impact Assessment has been prepared in respect of this Order and may be viewed at http://www.berr.gov.uk/consultations/ria/index.html.